By Our Correspondent
NEW DELHI/BHUBANESWAR/JODA/KOIRA: Union PNG-Steel Minister Dharmendra Pradhan and his Cabinet Colleague, Pralhad Joshi, who holds the key Ministries like Mines, Coal and Parliamentary Affairs, were on Thursday joined hands to face any crisis in raw material supply to Steel sector.
Pradhan’s meeting with Joshi assumed greater significance with Odisha, one of the largest suppliers of iron-ore, facing crisis in mining auction. The Naveen Patnaik led BJD Government had cancelled auction of 20 running mines and issued fresh tenders, which may create raw material problem if mines stopped operations by March 31, 2020.
“I along with Pralhad Joshi had a productive meeting of Mines, Steel and Environment Ministeries with the Odisha State Government. The meeting of minds will go a long way in assuring raw material supply for the Steel sector. We resolved to jointly facilitate the transition coming up in the next financial year. We will work resolutely to assure raw material for the steel sector which is critical to our economy,” Dharmendra twitted.
The cold war between India’s 3 leading Corporate Houses was on Monday forced the Naveen Patnaik led BJD Government in Odisha to cancel the ongoing bidding of some 20 running mines , lease expiring by March 30,2020.
The fresh notification for auction of 20 mines would be issued December 6, while the technical bid will be opened January 4 2020 next year, added the source. Letters of intent earlier expected to be granted to the highest bidder by January 2020 will now be signed in February next year.
Sources said, JSW Utkal Steel, which is planning a mega steel plant at Paradip in Jagatsinghpur district, where South Korean, POSCO failed, eyeing big mines in Odisha. The decision was taken after Adani group and ArcelorMittal, who participated in the first of two rounds of auctions, complained against JSW’s decision to bid for the largest block through half a dozen subsidiaries.
Sources said, JSW Steel has submitted multiple bids through its subsidiaries for a few key mineral blocks on offer. “Several companies including Adani Group- ArcelorMittal objected the practice, prompting the department to cancel the notice inviting tenders (NITs) for all the 20 working mines.
Among the 20 mining blocks was the massive 767.284 ha Nuagaon deposit with reserves of 792.93 million tonne, larger than all other iron ore deposits on offer.Sources said the state government has received 15 technical bids for the Nuagaon block of which six were from companies or subsidiaries of a particular steel major, sources further said.
The Naveen Patnaik Government after the new mines and minerals acts, has made it open that a company or its subsidiary can submit only one bid for a particular mineral block.
Among the first lot was the massive 767.284 ha Nuagaon deposit with reserves of 792.93 million tonne, larger than all other iron ore deposits on offer A net worth criterion of Rs 3872 crore had disqualified the incumbent lessee KJS Ahluwalia. Of the fifteen technical bids received for Nuagaon, six were from companies or subsidiaries of the Sajjan Jindal led JSW Group – JSW Steel, JSW Raigarh, JSW Bengal Steel, JSW Jharkhand Steel, JSW Utkal Steel, and Amba River Coke.
Elder brother Prithvi Raj Jindal’s Jindal SAW and younger brother Naveen Jindal’s Jindal Steel and PowerNSE -0.96 % and its subsidiary, Jindal Power, are also in the run.
While JSW Steel declined to comment, according to media reports. For ArcelorMittal, the mines are important to bring down costs at Essar Steel, for which the world’s largest steelmaker put in a bid of Rs 42,000 crore.
It has already got a boost, in the form of the Odisha Slurry Pipeline Infrastructure (OSPL). The pipeline supplies iron ore to Essar Steel’s pellet plant in Odisha. The pellets are then taken to Hazira to be used in Essar Steel’s plants.
ArcelorMittal has emerged as the highest bidder, with a bid of Rs 2,300 crore bid. Though Thriveni Earthmovers, a dominant player in Odisha’s mining industry, has bid over Rs 3,000 crore, the offer comes with a few riders. Thriveni’s offer is conditional, has a low upfront cash payment, and plus the payment schedule is long-drawn.
“For lenders, who have been focused on realising maximum recovery in these insolvency cases, the upfront payment element is paramount. It is conditional on the outcome of an existing legal dispute around the title of the asset,” said a source.
The turn of events will be a relief for lenders too, as things had got complicated in 2018, when Numetal – which had also bid for Essar Steel – claimed to have bought OSPL from Srei Infrastructure Fund. But the sale was disputed by the company’s lenders, led by SBI, who claimed that SREI is not the rightful owner of the pipeline company.
The Odisha government had earlier this year called for bids for 20 mines, leases of which will lapse in March next year. The auction saw bids from the likes of Tata Steel, Vedanta, JSW Steel, ArcelorMittal and JSPL. Overall, more than 50 companies had shown interest. One of the mines alone has a deposit of about 800 million tonnes.
But now the government has been forced to call for fresh auctions, after some players, including ArcelorMittal pointed out ‘loopholes’ in the process. A report said that the Adani Group has also complained about the same.The fault policy allowed JSW Steel to put in several bids through its subsidiaries. Subsequently, the Odisha government has brought about amendments in its tendering process.
Now, “a bidder shall submit only one bid for a particular mineral block. In case, a bidder submits more than one bid…through its affiliates, all such bids…will be rejected,” says a notification from the Odisha government.
Earlier, the Naveen Patnaik Government was hopeful that the auctions of 20 merchant mines initiated by Odisha is set to mop up Rs one trillion in revenue over the lease period of 50 years looks grim.
Whilst five iron ore blocks are set aside for end user industries, the remaining 15 are earmarked for bidding by merchant miners. Steel players, sponge iron ore producers, pellet manufacturers and pig iron makers along with leading merchant miners are anticipated to bid aggressively for these blocks and place steep premiums to acquire these mines where production hopes to take off seamlessly.
Since a large number of iron ore blocks are concomitantly offered for auctions, the Odisha government has pegged the reserve price for bids on a higher side. And, higher floor price is expected to hike the cost of mine acquisition and bolster the state coffers.
“The floor price is fixed at 15 per cent for iron ore blocks with deposits of up to 10 million tonnes and 25 per cent for higher quantum of deposits. Higher reserve price will spur more revenue for the state government. Besides, all these mines are ready to operate with associated infrastructure for smooth movement of minerals.
Amid all these congenial factors, both merchant mine producers and end users looking to grab mine for captive use are expected to pledge higher premiums. Our estimates suggest that over the 50 year lease period, Odisha could end up garnering Rs one trillion from these 20 blocks opened up for bids”, said a mining industry source.
Presently, Odisha has 17 operative merchant mines whose approved production capacity stands at 80 million tonnes. The leases whose tenure ceases by March 31, 2020 include the ones in the leasehold of major non-captive producers like Serajuddin, Essel Mining & Industries Ltd, KJS Ahluwalia and others.
Plans are afoot to extend the environment clearance of these mines by two more years to facilitate seamless transfer of ownership and unhindered production. Since forest clearance is co-terminus with the lease validity and cannot be extended as per existing statutes, an amendment is in the works on the Forest (Conservation) Act. The Union ministries of mines, law as well as environment, forest & climate change are holding mutual consultations in this connection.
In two phases, the state steel & mines department has issued Notice Inviting Tenders (NITs) to auction 20 blocks on October 4 and 14. After issue of NITs, the bids are set to be invited on November 18 and 28. Letters of Intent (LoIs) to the preferred bidders will be issued on January 3 and 15, 2020.
